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Working Paper
Local Projections
A central question in applied research is to estimate the effect of an exogenous intervention or shock on an outcome. The intervention can affect the outcome and controls on impact and over time. Moreover, there can be subsequent feedback between outcomes, controls and the intervention. Many of these interactions can be untangled using local projections. This method’s simplicity makes it a convenient and versatile tool in the empiricist’s kit, one that is generalizable to complex settings. This article reviews the state-of-the art for the practitioner, discusses best practices and ...
Working Paper
Analysis of Multiple Long Run Relations in Panel Data Models with Applications to Financial Ratios
This paper provides a new methodology for the analysis of multiple long-run relations in panel data models where the cross-section dimension, n, is large relative to the time-series dimension, T. For panel data models with large n, researchers have focused on panels with a single long-run relationship. The main difficulty has been to eliminate short-run dynamics without generating significant uncertainty for identification of the long run. We overcome this problem by using non-overlapping sub-sample time averages as deviations from their full-sample counterpart and estimating the number of ...
Working Paper
Estimating Taxable Income Responses with Elasticity Heterogeneity
We extend a standard taxable income model with its typical functional-form assumptions to account for nonlinear budget sets. We propose a new method to estimate taxable income elasticity that is more policy relevant than the typically estimated elasticity based on linearized budget sets. Using U.S. data from the NBER tax panel for 1979-1990 and differencing methods, we estimate an elasticity of 0.75 for taxable income and 0.20 for broad income. These estimates are higher than those obtained by specifications based on linearization. Our approach offers a new way to address the problem of ...
Working Paper
Analysis of Multiple Long Run Relations in Panel Data Models with Applications to Financial Ratios
This paper provides a new methodology for the analysis of multiple long-run relations in panel data models where the cross-section dimension, n, is large relative to the time-series dimension, T. For panel data models with large n, researchers have focused on panels with a single long-run relationship. The main difficulty has been to eliminate short-run dynamics without generating significant uncertainty for identification of the long run. We overcome this problem by using non-overlapping sub-sample time averages as deviations from their full-sample counterpart and estimating the number of ...
Journal Article
The Local-Spillover Decomposition of an Aggregate Causal Effect
This article presents a method to decompose the causal effects of U.S. defense spending on income into a local effect and a spillover effect using panel data. We estimate positive local and spillover multipliers. By construction, the sum provides an estimate of the aggregate multiplier, which is slightly greater than one in our benchmark specification. Using disaggregate data improves precision relative to using aggregate data alone. More generally, we provide a template to conduct inference on local, spillover, and aggregate causal effects in a unified framework.
Working Paper
Household Consumption and Savings over the Life Cycle: The Roles of Demographics and Durables
The canonical prediction of life-cycle models, that individuals smooth consumption over their lifetime, has mostly been tested in developed countries and found little empirical support. We provide a novel developing-country perspective by analyzing patterns of life cycle consumption, income, and savings rates in India. In contrast to the U.S., Indian households exhibit little growth in nondurable consumption expenditures after adjusting for family size. Surprisingly, this flat adjusted profile coexists with substantial income growth and a sharp rise in the savings/surplus rate over the life ...
Journal Article
Where Do the Wealthiest Get Their Wealth?
An analysis using data from Norway identifies the top 0.1% of wealth accumulators and then traces how their wealth evolved from their 20s to their 50s.
Working Paper
Climate Change and the Geography of the U.S. Economy
This paper examines how the spatial distribution of people and jobs in the United States has been and will be impacted by climate change. Using novel county-level weather data from 1951 to 2020, we estimate the longer-run effects of climate on local population, employment, wages, and house prices using a panel polynomial distributed lag (PDL) model. This model and the long historical data help capture important aspects of local climate changes, such as trends in temperature. The historical results point to long-lasting negative effects of extreme temperatures on each of the outcomes examined. ...